Who qualifies as a first-time buyer?
A lender will see you as a first-time buyer if you have never owned a residential property. This can either be in the UK or abroad. If you own a commercial property with no living space, you are also seen as a first-time buyer for a residential property.
However, if you meet the criteria above, but the person you’re applying with doesn’t, you will not be seen as first-time buyers. To add to this, if you have inherited a home, you will no longer be seen as a first-time buyer.
How to get a first-time buyer mortgage?
Step 1:
You will first need to understand how much you could borrow. This will give you an idea of your budget when house hunting, as well as preparing you for the next steps.
To get an idea of what you can borrow, try our quick and easy mortgage affordability calculator.
Step 2:
A great thing to do next is to look at your credit score. Your credit is a key assessment point when lenders review your application. Therefore, having a good score heading into an application will give you a better chance of success.
It’s best to get your credit score from all three of the top credit reference agencies. These are Experian, Equifax, and TransUnion, as a bonus all three agencies offer free account options.
Step 3:
Discuss your circumstances with a mortgage broker. They will be able to use their experience and review your situation, advising you on your best plan of action.
If they feel you have a strong chance of success they will advise you on this. However, this works both ways, they may think it’s best for you to wait a bit longer and save up more.
Step 4:
If your broker thinks it’s the right time, you can then look to obtain an agreement in principle. An agreement in principle (AIP) is a preliminary assessment by a lender to see how much you could borrow for a mortgage. It’s not a guarantee, but it gives you a good idea of what you can afford and shows that you’re a serious buyer.
Step 5:
When you or your broker thinks you are ready, it’s time to apply for a mortgage. Unlike an AIP, this application means a lender will run a hard search on your credit report. Therefore, be sure you’re making the right decision, as it could affect your future chances of applying if your application is declined.
How much deposit do first-time buyers need?
Typically, when purchasing a property, you need to provide a minimum deposit of 5%. Sometimes, if the property is cheaper, you can pay a smaller deposit. However, the minimum deposit amount will always stay at 5% of the total mortgage amount.
The size of the deposit will affect interest rates and mortgage options available to you. Deposits can come from personal savings, investments, or gifted deposits.
How much can first-time buyers borrow?
When applying for a mortgage, it’s important to establish an affordable monthly budget. Lenders assess a range of factors when determining how much you can borrow. They will look at things like:
- Your income
- Any financial commitments – e.g. student loans
- Your credit history
- How much deposit you have
Calculating what you can borrow for a mortgage is now more complex than before. Lenders have different rules and calculations, but most distinguish between first-time buyers and home movers. Lenders rarely exceed borrowing more than 5 times your income.
To get an accurate idea of what you could borrow, why not reach out today? Our expert advisors will be able to review your circumstances and give you an accurate guide.
How do lenders work out affordability for first-time buyers?
In the past, lenders determined the amount based on an income multiple, but now they also consider other factors.
In addition to income, lenders will consider several other factors when making decisions. These include:
- The length of time the loan can be repaid based on the applicant’s age
- The amount of deposit or equity available
- The number of dependants (not necessarily children)
- Any outstanding credit commitments
- Childcare expenses
- Pension contributions and other deductions from salary
- Council tax
- Travel costs
- Any ground rent or maintenance payments for leasehold properties
Finding the best first-time buyer mortgage rates
First-time buyers have access to the same mortgage rates as everyone else. Some lenders have special rates with extra benefits like free valuations, cash back, and help with fees.
To obtain the best possible rate for your mortgage, you will need to keep in mind that lenders want to see you as a minimal risk. Providing a larger deposit and having a good clean credit history are both great ways to demonstrate you are lower risk.
Using a mortgage broker is another good idea as they will be able to show your application in the best possible light. Therefore, increasing your chances of accessing a competitive rate
Using a mortgage broker as a first-time buyer
As a first-time buyer it can be very beneficial to seek assistance from a mortgage broker when looking to purchasing a property. They can help with finding the best mortgage deals along with the most suitable lenders and rates. A broker can also assist in finding you a new deal when the mortgage rate finishes.
Mortgage brokers can offer exclusive interest rates and terms in addition to what mainstream lenders provide. These rates and terms may not be available elsewhere due to exclusive deals provided to intermediaries by lenders.
Mortgage advice for first-time buyers
Buying a home is exciting but it can also be stressful and unfamiliar. An aspect that applies to almost all people purchasing a home for the first time is the mortgage.
When buying a house, many people seek help and advice. They want assistance in choosing from the numerous options available and understanding the complex terms involved.
You can find advice from a variety of sources, including:
- Relatives and close friends – An invaluable resource for first-hand and truthful insights into owning a home. Their understanding of the mortgage sector determines the reliability of the information they provide.
- The internet – An immense volume of knowledge accessible around the clock. Lots of information can make it hard to know where to start and find what you need.
- Lenders – Expert guidance customised to your specific requirements. However, there may be certain constraints to this viewpoint. They can only suggest what they can provide or do for you.
- Mortgage advisors – Comprehensive guidance specifically tailored to your unique requirements. Our mortgage specialists will make every effort to locate the ideal mortgage for individuals purchasing their first property, considering their individual circumstances.
A broker with many lenders has more choices than one with only one bank. Additionally, there might be a fee that needs to be paid.
